What is an Iceberg order?
An iceberg order is a large order split into smaller orders to blanket the actual order size. This is generally done by big investors mainly because of two reasons.
1) To avoid abrupt price variations in the market with a single large order as a large order value may result in panic among small investors creating high selling pressure and disturbing the demand and supply balance in the market. To avoid such a state of play, the orders are executed in a structured manner.
2) Also, it is not necessary that an order will be executed altogether. Suppose an investor wants to sell 5000 BTC. There are negligible chances that buyers are available for this big order, so investors divide the limit order into small chunks, say 200BTC, 250BTC, 300BTC, 200BTC and so on. This helps them to sell their assets at desired prices.
How to identify an iceberg order?
Traders will closely have to observe the order patterns in the market to identify the iceberg order. They can check for similar recurring order patterns on an exchange and take their trading decisions likewise.
Interesting Fact About Iceberg Order
Do you know the name iceberg orders comes from an interesting fact that a lot of orders are observable, just like the tip of an iceberg indicating more upcoming orders.
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